First-time buyers pay the price as they go head to head with investors

Thursday, October 22, 2015

Asking prices of homes coming on to the market have hit a new record, Rightmove said this morning.

The average new asking price is now £296,549 – up 0.6% in a month and 5.6% up on a year ago.

Rightmove said the new record has been fuelled by high demand for smaller properties – those with up to two bedrooms – as first-time buyers and buy-to-let investors go head to head.

It said that asking prices for these smaller homes are up 4.9% on a month ago and 9.6% on last year.

Supply of smaller homes has dropped by 8% compared with last year.

Nationally, excluding inner London, a typical smaller home now has an asking price of £184,676.

A typical second-stepper property new to the market has an asking price of £247,004 – illustrating the financial hurdle that second-time buyers need to clear.

The average asking price of a top-of-the-ladder home is £530,457.

Despite new asking price records being set, the actual rate of increase has slowed with the 9.6% monthly rise being the lowest October increase since 2010.

The portal said that a “vicious circle” has been created, with high tenant demand pushing buy-to-let landlords to invest.

According to Rightmove, many letting agents are reporting same day rentals, with little or no property available to let.

Rightmove described rental demand as “extraordinary”, citing lack of supply by housing associations and local authorities.

Rightmove director Miles Shipside said: “Tenant demand is such that many letting agents are reporting viewings and tenancy applications on the same day as marketing properties.

“In some cases they’ve nothing left to rent until tenants move out or a new influx of investor landlords gives some short-lived respite to tenants-in-waiting.

“Both investor landlords and first-time buyers looking to buy smaller homes are finding them in short supply. As they’re typically owned by potential first-time sellers, the price gap and costs of moving to the second step on the housing ladder deter them from coming to market.

“Competition is most fierce in this sector, with first-time buyers and buy-to-let investors going head-to-head for the same properties.”

Today’s Rightmove report follows that by Your Move and Reeds Rains, which says rents across the UK have hit an all-time high.

The average rent in London is now £1,301 a month, up 11.6% from a year ago.

Nationally, the average rent is up 6.3% on last year, to stand at £816 a month.